UK arm of prepaid financial services paid illegal dividend in 2019 – says EML
The UK arm of card payments group Prepaid Financial Services paid an “illegal” dividend to its then Irish parent company in 2019, the company’s new owner, EML, said in accounts recently filed in the UK.
The £9m (€10.8m) dividend was paid by Prepaid Financial Services Ltd (UK) to Australian EML a year before the company was sold to Australian EML by owners Noel and Valerie Moran PFS at more than 200 million euros including conditional earn-outs. The dividend was fully accounted for in the accounts until the new EML revisions and was proportional to the financial results at the time.
The PFS (UK) allegation focuses on the treatment of unused customer balances on prepaid cards and accounts prior to EML’s takeover.
It is common in the industry for unused balances on expired cards to eventually be confiscated as income by businesses, subject to strict timing rules.
According to EML-managed PFS (UK) latest accounts for 2021, previously reported results for 2019 were ‘accelerated by converting to cash and earnings from dormant accounts and expired e-money accounts six years ago from the expiry date’ the previously reported results.
That meant cash balances were removed from so-called secured funds before six years after the card expired.
EML, of which Tom Cregan is CEO, said it does not comply with UK e-money regulations and announced in July last year that it had about £14.8m in cash.
The re-filed accounts for 2021 include further key details, with a re-statement of revenue and profit and loss for 2019, known as a year-on-year restatement, showing that the change reflects a previously reported profit of €3m €1.5m .
The change meant that PFS UK “did not have sufficient adjusted distributable profits available for the 2019 dividend payment, resulting in the dividend being deemed illegal,” the balance sheet reads.
According to the balance sheet, the deficit in reserves was subsequently reversed through the realization of profits.
EML’s spokesman said the problems found in the UK operation were self-reported to the relevant regulator, the Financial Conduct Authority, in mid-2021.
The spokesman said that the problems identified in the UK relating to the early recognition of expired accounts as income were not found in the Irish branch.
“The security issues only affected UK regulated companies. The issues were entirely historical and predating the EML acquisition,” they said.
PFS founder and former CEO Noel Moran, who stepped down as director of PFS (UK) in June 2021, could not be reached for comment yesterday.
The new dividend-related claims are the latest in a litany of claims and
Prepaid Financial controversies.
In 2019, French authorities fined the group €1 million for its money laundering controls. Earlier this year, PFS was fined £916,746 (€1.1m) by the UK payment systems regulator following an investigation into cartel behavior in prepaid cards issued to benefit recipients.
In May 2021, EML said that Prepaid Card Services, part of the former PFS, was the subject of a central bank investigation into risk and control frameworks and governance related to anti-money laundering and counter-terrorist financing measures. News of the probe triggered a plunge in EML shares and has resulted in EML piling up €7 million in legal and other costs.
https://www.independent.ie/business/prepaid-financial-services-uk-arm-paid-an-illegal-dividend-in-2019-eml-says-41535471.html UK arm of prepaid financial services paid illegal dividend in 2019 – says EML